David Fickling

Badges of the final three car makers set to quit car manufacturing in Australia. Photo: Jessica Shapiro

Car makers have been active in Australia since Ford began assembling Model Ts in a converted wool store near Melbourne. That's poised to end in three years, when Toyota shuts its production lines in Altona about 60 kilometres away.

About 50,000 jobs in the country's car and parts industry are in jeopardy after Toyota on Monday followed Ford and Holden in announcing plans to stop manufacturing locally.

That poses a challenge for Prime Minister Tony Abbott, who won an election last September pledging to restore confidence in the economy. Australia's unemployment rate is at its highest level in a decade amid a waning of the mining boom that helped the country skirt recession after the 2008 financial crisis.

The production line Holden's Elizabeth plant in South Australia. Photo: Nicolas Walker

The country's main car plants are in districts where the jobless rate is already on par with the eurozone's.

''You're going to have suburbs that are going to lose tens of thousands of jobs within their locales,'' said Jim Griffin, national president of the Federation of Automotive Products Manufacturers. ''It's a dark day. It effectively sets an end date for the Australian automotive manufacturing industry.''

Unemployment in Melbourne's Brimbank-Sunshine region adjacent to Toyota's Altona plant and in the city's Broadmeadows district that houses Ford's main production lines was about 12 per cent in September, according to government data. In the Adelaide suburb of Elizabeth where Holden has its main plant, it was 22 per cent.

''We understand just how difficult the period ahead is going to be,'' federal Industry Minister Ian Macfarlane said. ''Australian industry will never be the same.''

With the third-highest rate of car ownership among countries with more than a million inhabitants, according to World Bank data, Australia has been making cars almost since it became a nation. Land surveyor Harley Tarrant built an early petrol-powered car with an imported Benz engine in 1901, the same year the country became independent from the British empire.

Ford started production in Geelong in 1925, and the then-prime minister, Ben Chifley, welcomed Holden's first car off a Melbourne production line in 1948.

Prime Minister Ben Chifley with the first Holden in 1948.

Toyota started production in 1963. The foundation stone at its Altona plant was laid by Eiji Toyoda, the industrialist who oversaw the car maker's global expansion, the company's president Akio Toyoda said this week at the site.

''Despite numerous headwinds we believed that we should keep producing cars here,'' he said. ''We gave everything to that effort. Unfortunately, however, we have had to make the painful decision, the end of production of cars by the end of 2017.''

Protected by tariff barriers and a weaker currency, locally produced cars such as the Ford Falcon driven by Mel Gibson in Mad Max dominated the local market until Mazda's 3 became the bestseller in 2011. The Falcon and Holden's Commodore accounted for 18 per cent of the local market in 2003, before dropping to 3.3 per cent last year, according to data from the Federal Chamber of Automotive Industries.

As recently as 2007, the three car makers and Mitsubishi sold 200,485 locally produced cars. That dropped 41 per cent to 118,510 cars last year, the chamber's data shows.

Local production has been threatened as a commodities boom helped drive the value of the Australian dollar to $US1.11 in July 2011, the highest level in the 30 years since exchange controls were dropped. While the currency has since depreciated to about 89¢ to the US dollar, it's still higher than at any point in the 18 years up to 2007.

That's left Toyota's local car lines, which produced 101,424 vehicles during 2012, struggling to hold their own in a global company that turns out 10 million cars a year. The company had been struggling to cut $3800 from the cost of building a car in Australia to make it competitive with plants in Kentucky and Japan.

''It is not viable to continue manufacturing in Australia,'' Toyota Australia's president Max Yasuda said this week, citing the strength of the dollar, high manufacturing costs, low economies of scale, and free trade agreements that had opened the Australian market to cheaper imported models.

Holden estimates it costs about $US3750 more to produce a car in Australia than elsewhere. Ford said last May that its costs here were double those in Europe and four times those of its Asian divisions. The two car makers will close their local plants in 2017 and 2016 respectively.

The flood of imports, mainly from Asia, has resulted in locally made vehicles accounting for only 10 per cent of car sales in Australia this year, versus 80 per cent three decades ago, according to data from Ford and the industry association.

''This is a hammer blow for manufacturing in Australia,'' said Martin Whetton, an interest-rate strategist at Nomura Holdings in Sydney. ''It will weigh on consumer sentiment and is a setback. Despite a fall in the Australian dollar, it appears some industries are just not going to get their mojo back.''

Automotive vehicles and parts were the third-biggest export earner in Australia's manufacturing sector in 2012, trailing medicine and refined aluminum, according to government data quoted in Toyota's submission to an inquiry into the industry's future in November.

The end of manufacturing by the major car makers removes the parts manufacturers' customer base, said Richard Johns, principal of consultancy Australian Automotive Intelligence. ''It'll be only a handful that adapt,'' he said. ''It's very hard to compete from this distance.''